STEVENS POINT AREA
ECONOMIC INDICATORS
College of Professional Studies
Third Quarter
2011
Presented by:
The Central Wisconsin Economic Research Bureau
Randy F. Cray, Ph.D.
Professor of Economics, CWERB Director
Scott Wallace, Ph.D.
Associate Professor of Economics, CWERB Research Associate
James P. Draxler and Brittany J. Melby
Research Assistant
Featuring:
Measuring Entrepreneurial Activity
Special Report:
Business Modeling: A new tool to encourage entrepreneurial activity
and new venture creation
John Leschke, PhD, MBA, BME
Assistant Professor of Entrepreneurship
University of Wisconsin-Stevens Point School of Business and Economics
1
TABLE OF CONTENTS
National and Regional Outlook .............................................................................................. 1
Table 1: National Economic Statistics.......................................................................... 3
Central Wisconsin................................................................................................................... 4
Table 2: Unemployment Rate in Central Wisconsin .................................................... 4
Table 3: Employment in Central Wisconsin ................................................................. 4
Table 4: Wisconsin Employment Change by Sector .................................................... 5
Table 5: County Sales Tax Distribution ........................................................................ 5
Table 6: Business Confidence in Central Wisconsin .................................................... 6
Figures 1-7 .................................................................................................................... 7
Stevens Point-Plover Area ...................................................................................................... 8
Table 8: Retailer Confidence in Stevens Point – Plover Area .................................... 8
Table 9: Help Wanted Advertising in Portage County ............................................... 8
Table 10: Public Assistance Claims in Portage County ................................................ 9
Table 11: Public Assistance by Program Type ............................................................. 9
Table 12: Unemployment Claims in Portage County .................................................. 9
Table 13: Residential Construction in Stevens Point – Plover Area .......................... 10
Table 14: Nonresidential Construction in Stevens Point – Plover Area .................... 10
Figures 8-11 ................................................................................................................ 11
Housing Market Information
Table 15: National Median Home Prices ................................................................. 12
Table 16: National Existing Home Sales ................................................................... 12
Table 17: National Inventory ................................................................................... 13
Table 18: National Affordability Index ..................................................................... 13
Table 19: Local Area Median Price .......................................................................... 14
Table 20: Local Units Sold ........................................................................................ 14
Table 21: Local Median Price ................................................................................... 15
Table 22: Local Number of Home Sales ................................................................... 15
Measuring Entrepreneurial Activity ..................................................................................... 16
Special Report ...................................................................................................................... 22
Business Modeling: A new tool to encourage entrepreneurial activity and new venture creation
Association for University
Business and Economic Research
CWERB - Division of Business and Economics
University of Wisconsin-Stevens Point
Stevens Point, WI 54481
715/346-3774 715/346-2537
www.uwsp.edu/business/CWERB
Outlook
Early in the year I talked about why this recovery feels like it’s just a continuation of the past
recession. I would like to share my thoughts on this with the Stevens Point audience and
readers. Gains in productivity and international sales have helped expand the Real Gross
Domestic Product. For nine consecutive quarters, the nation’s output of goods and services has
been expanding. However, for the past three quarters the growth in Real GDP has been very
weak. This suggests the economy has been walking a tight rope and no one is quite sure if the
economy will continue to grow or if it will fall back into a recession. One bright piece of news is
the European Union may have come up with a debt plan which will hopefully prevent a major
recession in Europe. If the plan is not accepted by Greece then big economic problems may be
in store for Europe. If a major trading partner like Europe experiences a recession, then the
thought is that the U.S. economy would soon follow.
The most distinguishing characteristic of this recovery, and why this recovery feels so bad, is the
lack of strong employment growth. This is what has truly defined the recovery and continues to
be a major concern of the American people. The official seasonally unadjusted unemployment
rate was 8.8 percent in September. As a matter of record the unemployment rate has been
hovering around 9.0 percent for over two years! If discouraged workers and part time workers
are taken into account, the real unemployment rate is around 16 percent. With total
employment growing by only 0.6 percent over the past year in the US, it could take until the
end of this decade before total employment reaches pre-recession levels. In addition to the
poor job market, households are being negatively affected by the loss of wealth associated with
falling real estate prices and high debt levels. Moreover, households continue to be unnerved
by the high degree of volatility in the world’s financial markets. While the markets have been
trending higher there is still a huge amount of uncertainty as to how investors will react to the
next piece of bad news.
There are not many people left who remember the great financial crises of the 1930s. From a
historic perspective recessions caused by wide spread financial excess are unusually deep and
their recoveries are painfully slower than other types of recessions. Why? As most people
already know a huge number of households are underwater with their mortgages or are behind
in their monthly debt payments. Moreover, a huge number of important financial institutions
suffered large mortgage related losses. This means the balance sheets of households and
financial institutions are in great need of repair. Balance sheet repair usually takes a long time
to accomplish and it does not happen overnight. In the near term it is going to be difficult for
households and financial institutions to provide the spending and lending needed to generate
significant improvement in the nation’s labor market. Also aggravating the job recovery has
been the growing intensity of international competition and the resulting loss of jobs to
overseas competitors. Ben Bernanke, chairman of the Federal Reserve, recently indicated that
the economic recovery will be tempered by “hard-to-get credit for consumers and businesses,
and by households saving more, spending less and trimming their debt.” To underscore the
difficulty that households are having, consider what has happened in Wisconsin. The U.S.
Census Bureau reports the real inflation adjusted median household income in Wisconsin has
dropped from $57,316 in 2000 to $49,993 in 2009, a decline of 14.5 percent! It’s no wonder
why the recovery has been almost non-existent.
The Federal Reserve and other economic forecasters have lowered their growth estimates for
the remainder of this year and next. They say the probability of a recession in 2012 is at least
50 percent. Some forecasters, who are more bearish about the economy, put the probability at
over 60 percent for 2012. Adding to the air of pessimism is the seeming ineffectiveness of
monetary policy to stimulate the economy. With real interest rates near zero and the economy
awash in liquidity, it is hard to imagine how more liquidity would convince households and
businesses to engage in more economic activity. The Federal Reserve’s attempt to lower long
term interest via “Operation Twist” is not likely to help the short-term problems of the
economy.
When it comes to fiscal policy it appears the federal government and states are more
concerned with reducing budget deficits than dealing with the unemployment crisis. Raising
taxes and reducing spending to close budget deficits will create an immediate drag on the
economy and raises the probability of a second recession. Reducing government deficits is
without question a necessary step in restoring the long run competiveness of the national
economy. Unfortunately the benefits from cutting spending and/or raising taxes to bring our
economic house in order will be years away and will be painful for most Americans.
Due to increases in productivity and foreign sales, US nonfinancial business firms are making
record profits and are sitting on approximately two trillion dollars of cash. Their reluctance to
hire new workers is due to the uncertainty surrounding future government spending, tax, and
regulatory policies. It would also help planning efforts if any policy changes were made
permanent. This uncertainty make forecasting the long term demand for their products very
difficult and adds to their reluctance to hire additional workers or to invest in factory, plant and
equipment. Lastly, the federal government inability to come to a consensus about how to deal
with the budget deficit has had the effect of increasing business risk for firms. The nation’s
political leaders must realize they need to put their ideologies on hold, because the inability to
reach a political consensus is hurting the nation’s business climate and the people of this
country.
2
TABLE 1
NATIONAL ECONOMIC STATISTICS
2010
Third Quarter
2011 Percent
Third Quarter Change
Nominal Gross Domestic Product (Billions)
$14,605.5
$15,198.6
+4.1
Real Gross Domestic Product (Billions of 2000 $)
$13,139.6
$13,352.8
+1.6
93.2
94.2
+1.1
Three Month U.S. Treasury Bill Rate
0.14%
0.02%
-85.7
Consumer Price Index(1982-84 = 100)
218.4
226.9
+3.9
Industrial Production (2002 = 100)
3
Central Wisconsin
The unemployment rate in each reporting areas is given in Table 2. In September 2011 Portage
and Wood counties saw their unemployment rates rise to 6.0, and 6.9 percent respectively. The
Marathon county
TABLE 2
UNEMPLOYMENT RATE Unemployment Rate Unemployment Rate Percent unemployment rate fell to
CENTRAL WISCONSIN
September 2010
September 2011 Change 7.0 percent from 7.2 over
the course of the year.
Portage County
5.7%
6.0%
+5.0
The labor force weighted
City of Stevens Point
7.4%
7.6%
+2.7
unemployment rate for
Central Wisconsin was
Marathon County
7.2%
7.0%
-2.8
unchanged staying at 6.7
Wood County
6.7%
6.9%
+2.7
percent. Similarly
Wisconsin’s
Central Wisconsin
6.7%
6.7%
0.0
unemployment rate
Wisconsin
7.0%
7.0%
+0.1
remained at the same
United States
9.2%
8.8%
-4.5
level as last year, 7.0
percent and the United
States unemployment rate fell from
TABLE 3
Total Employment Total Employment Percent
9.2 percent to 8.8 percent. Thus,
EMPLOYMENT
September 2010
September 2011 Change
overall there was little or no
CENTRAL WISCONSIN
(Thousands)
(Thousands)
improvement in the unemployment
Portage County
39.6
39.7
+0.3
numbers.
City of Stevens Point
14.0
13.9
Employment figures in Table 3 are
Marathon County
67.3
67.2
based on a government survey of
Wood County
38.2
37.5
households. Portage County
employment rose by 0.3 percent
Central Wisconsin
145.1
144.4
over the course of the year.
Wisconsin
2,823.1
2,849.6
However, the news for Marathon
United States
139,714
140,502
and Wood County payrolls was not
as good. Employment contracted
* Percent change figures reflect data before rounding
by 0.2 percent and 1.8 percent
respectively in these counties over the past twelve months. Central Wisconsin as a whole
experienced an employment decrease of about 700 positions. Employment in the three
counties fell from 145.1 to 144.4 thousand or by 0.5 percent. The state of Wisconsin saw its
payrolls rise by 0.9 percent or by about 26,000 positions and the nation gained 0.6 percent or
about 778,000 jobs over the year. Thus, the amount of job generation continues to be very
modest in the state and nation. At this rate it will take the nation to the end of decade to
recover the jobs lost during the great recession.
Table 4 gives the latest firm based employment numbers for Wisconsin. Information from the
state of Wisconsin was not available at the time of the report for the state’s non-metro
counties. From September 2010 to September 2011 Wisconsin’s total nonfarm employment
rose from 2.755 million to 2.777 million or by a scant 0.8 percent. This represents a gain of just
4
-0.7
-0.2
-1.8
-0.5
+0.9
+0.6
21.5 thousand jobs during the past year. The sectors of the economy to experience job growth
were the manufacturing, trade, transportation and utilities, information services, educational
and health services, leisure and hospitality and other services. Good news for the state is the
manufacturing sector, after many years of contraction, expanded by about 15.0 thousand
positions or by 3.4 percent over the year. However, the employment results for the rest of the
industrial sectors were very disappointing. The mining, construction, financial activities,
professional and business services, and government sector all experienced declines in
employment.
TABLE 4:
WISCONSIN EMPLOYMENT
CHANGE BY SECTOR
Employment
Employment
September 2010 September 2011 Percent
(Thousands)
(Thousands)
Change
Total Nonfarm
2755.9
2777.4
+0.8
Total Private
2346.6
2376.1
+1.3
Natural Resources and Mining
3.3
3.3
0
Construction
101.9
95.6
-6.2
Manufacturing
437.4
452.1
+3.4
Trade, Transportation, and Utilities
508.6
512.5
+0.8
Information
46.8
47.3
+1.1
Financial Activities
157.2
153.4
-2.4
Professional and Business Services
275.3
272.2
-1.1
Educational and Health Services
417.8
428.9
+2.7
Leisure and Hospitality
261.3
266.1
+1.8
Other Services, exc. Public
137.0
144.7
+5.6
Government
409.3
401.3
-2.0
County sales tax distributions were generally above the pace of a year ago (Table 5). Portage
County sales tax distributions rose from $1.23 million to $1.29 million, an increase of nearly 4.8
percent. Likewise, Marathon experienced a slight improvement in sales tax distributions from
the state. Marathon rose from $2.47 million to $2.51 million or by 1.9 percent. Unfortunately
Wood County
TABLE 5
2010
2011
Percent
collections contracted
COUNTY
SALES
TAX
DISTRIBUTION
Third
Quarter
Third
Quarter
Change
from $1.24 million to
(Thousands)
(Thousands)
$1.23 million or by
about 0.4 percent
Portage County
$1,226.9
$1,285.9
+4.8
over the course of the
Marathon County
$2,466.9
$2,514.6
+1.9
past year. In general
there was a slight
Wood County
$1,239.1
$1,234.4
-0.4
improvement in retail
* Percent change figures reflect data before rounding
activity in Central
Wisconsin.
5
The CWERB’s survey of area business executives is reported in Table 6. This group believes that
recent events at the national level have led to deterioration in economic conditions. In addition
they believe the local business climate has stayed about the same over the past year. When
they were asked to forecast the future they expect economic conditions to improve ever so
slightly in late 2011. Also, they expressed the same level of optimism for the local economy and
for their particular industry in September 2011. Basically they felt that economic matters
would not change for their business and for their community. Table 6 also shows that the level
of optimism was generally higher in June 2011 than in September 2011.
TABLE 6
BUSINESS CONFIDENCE
Index Value
June 2011
September 2011
Recent Change in National
Economic Conditions
62
42
Recent Change in
Local Economic Conditions
55
48
Expected Change in
National Economic Conditions
65
55
Expected Change in
Local Economic Conditions
65
52
Expected Change in
Industry Conditions
63
52
100 = Substantially Better
50 = Same
6
0 = Substantially Worse
Figures 1 thru 7 give a historic overview of how the economy in Wisconsin has performed
during the 2007-2011 time period. For example Figure 5 shows the dramatic decline in
Wisconsin manufacturing and the rebound taking place since 2010. In 2007 about 508,000
were employed in manufacturing and at the end of 2010 the number of jobs bottomed out at
approximately 425,000; thus over this period the recession caused 83,000 jobs to be lost in this
one sector alone. Since that time the rebound in activity has added about 20,000 positions to
the manufacturing sector. Figure 7 shows the steep decline in the number of people employed
in leisure & hospitality, from about 262,000 in 2007 to 255,000 in the late-2011. Thus about
7,000 jobs have been lost over the past three years in this sector.
Figure 1: Employment Level: WI
Figure 2: Unemployment Level: WI
325
300
275
250
225
200
175
150
125
100
3000
2975
2950
2925
2900
2875
2850
2825
2800
2775
2750
2007
2008
2009
2010
2011
2012
2007
Figure 3: Unemployment Rate: WI
2008
2009
2010
2011
2007
2012
Figure 5: Manufacturing: WI
510
500
490
480
470
460
450
440
430
420
2007
2010
2011
2012
2008
2009
2010
2011
2012
Figure 6: Education and Health Services: WI
430
425
420
415
410
405
400
395
390
2008
2009
2010
2011
2007
2012
Figure 7: Leisure and Hospitality: WI, In Thousands
265.0
262.5
260.0
257.5
255.0
252.5
250.0
247.5
2007
2009
Figure 4: Labor Force: WI
11
10
9
8
7
6
5
4
2007
2008
7
2008
2009
2010
2011
2012
2008
2009
2010
2011
2012
Stevens Point – Plover Area
We usually include Table 7 which gives employer based estimates of industrial sector
employment in Portage County. However, please note at the time the report was written these
data for September were not available from the Wisconsin Department of Workforce
Development. Hopefully these data will be available on a timely basis in the future and will be
included in the report.
In Table 8 the September CWERB’s retailer confidence survey finds that merchants feel that
actual store traffic and store sales did not improve over the levels of the previous year. In
addition, their expectations about store traffic and sales have become more pessimistic than in
June 2011. When it comes to
TABLE 8
expectations about the future it appears RETAILER CONFIDENCE
Index Value
STEVENS POINT - PLOVER AREA
June 2011
September 2011
that June 2011 assessment of retail
activity was marginally stronger than in
Total Sales Compared
48
50
to Previous Year
September 2011. This group feels that
retail activity in the later part of 2011
Store Traffic Compared
48
52
to Previous Year
will be not be any better than what is in
Expected Sales Three
57
50
2010. The overall significance of the
Months From Now
survey is that local merchants are saying
Expected Store Traffic
57
50
that there is little improvement taking
Three Months From Now
place in the local retail sector.
100 = Substantially Better
50 = Same
0 = Substantially Worse
Please note the CWERB is unveiling a new help wanted advertising measure that is based on job
advertising on the web. Table 9 Help Wanted Advertising is a barometer of local labor market
conditions and indexes for Stevens Point, Wausau, Marshfield and Wisconsin Rapids are now
based on job advertising on the internet. The index for Stevens Point and Marshfield rose by 37
percent and by 30
TABLE 9
Index Value
percent
HELP WANTED ADVERTISING Second Quarter 2011 Third Quarter 2011 Percent Change
respectively when
compared to a year
Stevens Point
398.30
544.67
36.7%
ago. However,
Wausau
922.34
989.67
7.3%
Wisconsin Rapids
Marshfield
525.00
682.33
30.0%
experienced a
decline in the
Wisconsin Rapids
269.31
224.33
-16.7%
amount advertising
taking place by about 17 percent. Wausau’s index grew by just 7 percent. These data suggests
that advertising growth has been uneven in the area labor markets. If these data hold true,
then perhaps as 2012 unfolds we will see a stronger overall market for job seekers.
8
Tables 10, 11 and 12 give valuable insight into how local family financial distress fared in
Portage County over the past year. The number of new applications for public assistance
decreased from 185 to 150 or by 18.9 percent. However, the total caseload for public assistance
rose from 6,609 to 6,648 or
TABLE 10
2010
2011 Percent
by a scant 0.6 percent over
PUBLIC ASSISTANCE CLAIMS
Third Quarter
Third Quarter Change
the year. Table 11 gives
PORTAGE COUNTY
(Monthly Avg.) (Monthly Avg.)
detailed information on the
New Applications
185
150
-18.9
types of public assistance
for July-September. Since
Total Caseload
6,609
6,648
+0.6
the data are new to the
report, we do not have
TABLE 11
comparable numbers for
BY PROGRAM TYPE
Third Quarter 2011
PORTAGE
COUNTY
July
August
September Average
2010. In the future we will
be able to give year over
Medical Assistance
11,394
11,369
11,351
11,371
(All Programs)
percentage changes for
these numbers.
Food Share
2,458
2,453
2,448
2,453
(Food Stamps)
In Table 12 the number of
W2
22
25
22
23
new unemployment cases
(Paid Cases Only)
fell by over 30 percent
Wisconsin Shares
428
400
413
414
when compared to the
Child Care
levels in 2010. In addition
and more importantly the
TABLE 12
2010
2011 Percent
total claims number
UNEMPLOYMENT CLAIMS
Third Quarter
Third Quarter Change
dropped from 2,359 to
PORTAGE COUNTY
(Weekly Avg.)
(Weekly Avg.)
1,889 or by about 20
New Claims
275
190
-30.8
percent over the year.
Total Claims
2359
1889
-19.9
Typically results like this
are good news for the local
area and are thought to mean that fewer people are filing for unemployment claims. However,
if a large portion of the decline in the number of cases is due to people’s unemployment
insurance running out then the decline would not be taken as a positive economic sign.
Table 13 presents the residential construction numbers for the Stevens Point-Plover area. In
our yearly comparison the number of permits issued in Third Quarter was 12 and they had an
estimated value of $3.76 million. The number of housing units totaled 35. When comparing
Third Quarter 2010 to that of 2011 residential alteration activity expanded from 223 to 259
permits. However, the value of this type of activity went down from $2.23 to $2.19 million.
Thus, overall the 2011 construction data results were mixed when compared to a year ago.
9
TABLE 13
RESIDENTIAL CONSTRUCTION
STEVENS POINT - PLOVER AREA
2010
Third Quarter
Residential Permits Issued
Estimated Value of
New Homes
24
12
-50.0
$10,645.1
(thousands)
$3,757.0
(thousands)
-64.7
25
35
+40.0
233
259
+11.2
$2,237.7
(thousands)
$2,193.6
(thousands)
-2.0
Number of Housing Units
Residential Alteration
Permits Issued
Estimated Value
of Alterations
2011 Percent
Third Quarter Change
The nonresidential construction figures in Table 14 were as follows for Third Quarter 2011. The
number of permits issued was 7 and the estimated value was $3.5 million. This is a large
increase over the 2010 estimated value of new structures figure. The number of business
alteration permits was 55 in 2010 compared to 51 in 2011. The estimated value of alteration
activity was $2.78 million in 2010 compared to the 2011 figure of $2.02 million. In sum the pace
nonresidential construction activity was more brisk in the prior year.
TABLE 14
NONRESIDENTIAL CONSTRUCTION
STEVENS POINT - PLOVER AREA
2010
Third Quarter
Number of Permits Issued
Estimated Value of
New Structures
2
7
$310.0
(thousands)
$3,522.0
(thousands)
55
51
$2,777.2
(thousands)
$2,028.4
(thousands)
Number of Business Alteration Permits
Estimated Value
of Business Alterations
2011
Third Quarter
* Includes Stevens Point, Village of Plover, and the Towns of Hull, Stockton, Sharon,
and Plover.
10
Figures 8 thru 11 on the next page give an economic history lesson as to how the employment
level, the unemployment level, the unemployment rate, and the labor force have trended over
the past five years in Portage County. The figures clearly show the influence of the great
recession on the area local economy and the figures supplement the report’s short-term data
by placing it into a longer- term context. Also this allows short-term events to be judged more
properly.
Figure 8: Employment Level: Portage
41500
41000
40500
40000
39500
39000
38500
38000
37500
37000
36500
2007
2008
2009
2010
2011
2012
Figure 10: Unemployment Rate: Portage
10
9
8
7
6
5
4
3
2007
2008 2009 2010 2011 2012
4000
3750
3500
3250
3000
2750
2500
2250
2000
1750
1500
1250
Figure 9: Unemployment Level: Portage
2007
2008
2009
2010
2011
2012
Figure 11: Civilian Labor Force: Portage
44.5
44
43.5
43
42.5
42
41.5
41
40.5
40
39.5
2007
11
2008
2009
2010
2011
2012
Housing Market Information
The following seven tables contain information on the national, regional, and local housing
market. Housing activity is an incredibly important aspect of the economy. We believe the
reader will gain valuable insight into housing markets conditions and greater insight into the
local economy in section III of the report.
Table 15 gives national median home price for the U.S. and major regions in the U.S. housing
prices in the Midwest are the lowest in the country. The median home price in our part of the
country has dropped from $167,800 in 2006 to $137,400 in 2011, a decline of 18 percent. In
general housing prices have declined dramatically in all parts of the U.S.
TABLE 15
NATIONAL MEDIAN
HOME PRICES
U.S
THIRD QUARTER 2011
NORTHEAST
MIDWEST
SOUTH
WEST
2006
$221,900
$271,900
$167,800
$183,700
$342,700
2007
219,000
279,100
165,100
179,300
335,000
2008
198,100
266,400
154,100
169,200
271,500
2009
172,500
240,500
144,100
153,000
211,100
2010
173,000
243,500
141,699
150,100
215,100
September 2011 p
165,400
229,400
137,400
144,400
207,400
Table 16 National and the Midwest existing home sales data shows a substantial drop off in
sales activity over the past six years. In the Midwest 1,483,000 homes were sold in 2006. The
preliminary estimate for 2011 is that only 1,090,000 homes will be sold in 2011 in Midwest, a
decline of 30 percent.
TABLE 16
NATIONAL EXISTING
HOME SALES
U.S
THIRD QUARTER 2011
NORTHEAST
MIDWEST
SOUTH
WEST
2006
6,478,000
1,086,000
1,483,000
2,563,000
1,346,000
2007
5,652,000
1,006,000
1,327,000
2,235,000
1,084,000
2008
4,913,000
849,000
1,129,000
1,865,000
1,070,000
2009
5,156,000
868,000
1,163,000
1,914,000
1,211,000
2010
4,908,000
817,000
1,076,000
1,861,000
1,154,000
September 2011 p
*Annualized Basis
4,910,000
790,000
1,090,000
1,890,000
1,140,000
12
The national inventory of homes is given in Table 17. As of June 2011 the inventory backlog is
estimated to be 9.2 months. In 2006 the national supply of homes was only 6.5 months.
TABLE 17
NATIONAL
INVENTORY
THIRD QUARTER 2011
INVENTORY MONTH SUPPLY
2006
3,450,000
6.5
2007
3,974,000
8.9
2008
3,700,000
10.4
2009
3,283,000
8.8
2010
3,560,000
9.4
June 2011 p
3,717,000
9.2
Table 18 presents the national affordability index. Low interest rates and falling home prices
have greatly improved the affordability of homes. The preliminary estimate for 2011 of 183.7
means that a household earning the median income has 183.7 percent of the income necessary
to qualify for a conventional loan covering 80 percent of a medium-priced existing single-family
home. The higher the index, the more affordable housing is becoming for the typical family.
TABLE 18
NATIONAL
AFFORDABILITY INDEX
THIRD QUARTER 2011
MEDIAN PRICED
MONTHLY PAYMENT
MEDIAN
EXISTING SINGLE MORTGAGE
P&I
AS A %
FAMILY
FAMILY HOME
RATE
PAYMENT OF INCOME INCOME
QUALIFYING
INCOME COMPOSITE
2007 r
217,900
6.52
1,104
21.7
61,173
52,992
115.4
2008 r
196,600
6.15
958
18.1
63,366
45,984
137.8
2009 r
172,100
5.14
751
14.6
61,845
36,048
171.6
2010 r
173,200
4.89
735
14.3
61,583
35,280
174.6
September 2011 p
168,400
4.69
698
13.6
61,553
33,504
183.7
P&I = Principal and interest
Composite = measures affordability . For ex ample for the y ear 2011, the index of 183.7 means a family earning the median family income has 183.7 percent of the income necessary
to qualify for a conv entional loan cov ering 80 percent of a median-priced ex isting single-family home.
13
Table 19 displays data on state and local area median prices. For the most part the state of
Wisconsin and local area prices has been more stable than the U.S. as a whole. In Central
Wisconsin the lowest median home price is in Wood County at $92,600. Portage County has the
highest medium price of $136,000 and Marathon falls somewhere between other the two
counties, with a medium house price of $114,000.
TABLE 19
LOCAL AREA
MEDIAN PRICE
WISCONSIN
MARATHON
PORTAGE
WOOD
2008
$154,000
$134,500
$135,000
$94,000
2009
142,500
126,800
132,000
94,500
2010
141,000
123,000
132,375
97,000
2011
132,682
114,000
136,000
92,600
Table 20 gives the number of local housing units sold. The state and the counties of the region
have all experienced substantial declines in the number of units sold. Home sales on a yearly
basis have contracted by approximately 38 percent in Wisconsin over the past four years.
TABLE 20
LOCAL
UNITS SOLD
WISCONSIN
MARATHON
PORTAGE
WOOD
2008
54,924
1,142
533
652
2009
55,132
1,090
532
714
2010
51,263
1,074
474
620
2011
36,828
727
329
398
14
Tables 21 and 22 present the changes that have taken place in the local median prices and units
sold, and compare second quarter 2010 to second quarter 2011.
TABLE 21
LOCAL MEDIAN
PRICE
SECOND QUARTER 2011
MARATHON
PORTAGE
WOOD
Second Quarter 2010
129,000
164,695
91,000
Second Quarter 2011
118,000
132,000
113,900
-8.5%
-19.9%
25.2%
Percent Change
TABLE 22
NUMBER OF
HOME SALES
SECOND QUARTER 2011
MARATHON
PORTAGE
WOOD
Second Quarter 2010
132
70
74
Second Quarter 2011
109
47
77
-17.4%
-32.9%
4.1%
Percent Change
15
Measuring Entrepreneurial Activity as Potential Measure of Job Growth
UWSP Small Business Development Center
Vicki Lobermeier, SBDC Director of Entrepreneurship Activities
Mary Wescott, SBDC Counseling Manager
In recent months, the Ewing Marion Kauffman Foundation released data showing that while
more firms than ever have been created each year since the current recession began, the small
businesses are not creating as many jobs per start. In the 1990’s, Bureau of Labor Statistics data
showed that new businesses opened their doors with an estimated 7.5 jobs on average, compared
to 4.9 jobs per new establishment today. Businesses are starting out smaller and staying smaller.
Kauffman studies demonstrates that this trend pre-dates the recession. In response the Kauffman
Foundation has put together a startup act proposal encouraging more high-growth small business
startups. Information on the Kauffman studies and proposal can be found at
http://www.kauffman.org/Section.aspx?id=Entrepreneurship
Among the attributes to record and measure, the Kauffmann Index of Entrepreneurial Activity
suggests measuring
 New Business Development – New incorporations and LLC formations
 Access to Capital – US Small Business Administration Loans
We’ll use these measures to compare entrepreneurial activity in the Portage, Marathon and Wood
Counties for the period (1Q – 3Q) of 2010 compared to the same time period in 2011.
Please note that New Business Development includes only separate legal entities of LLC and
Incorporations and does not include formations of sole proprietors.
New Business Development
Q1 – Q3 2010 showed a total of 736 new business entities created. The numbers of sole
proprietorships created during any period is unknown.
Q1 – Q3 2011 shows a total of 776 new business entities created. This is an increase over the
same time period in 2010. The most starts during the two periods were filed during Q2 2011.
Access to Capital
In our 3-county region, over 18 M in SBA loans were issued Q1-3 in 2011 compared to 13.7 in
Q1-3, 2010, an increase of 4,372,000 in 2011. The number of loans was fewer in 2011, but the
overall capital infusion amount into the marketplace was much greater. The quarter with the
largest loan amount was the most recent, Q3 of 2011.
Formal Starts Q3: 2010 & 2011
16
Total Starts Q3: 2010 & 2011
Total Starts Q1 thru Q3: 2010 & 2011
Number of Total Starts Q1 thru Q3
17
Total Loan Amount/Month
Total Number of SBA Loans
Overall Total SBA Loan Amount – 3rd
Quarter 2011
18
Q1, Q2, & Q3 Overall Total Loan Amounts
Total Loan Amounts Q1 thru Q3
Q1, Q2, & Q3 Total Loans
19
Total Loans Q1 thru Q3
Totals – Wisconsin Department of Workface Development
20
SNAP 2010 Data: Marathon, Portage, and Wood
1,000
900
800
700
600
500
400
300
200
100
0
Totals- Wisconsin Department of
Workforce Development SNAP
2010 data: Marathon, Portage, and
Wood Counties
21
Business Modeling: A new tool to encourage entrepreneurial activity and new venture
creation
By: John Leschke
Introduction
“You don’t have a business, until you have a business plan!”
“Show me your business plan!”
How many times have we heard these statements or variations on this theme? The business plan
document has taken on an aura of a “rite of passage” or “the” major hurdle to clear on the way to
launching a new venture.
But what does an aspiring entrepreneur exploring a variety of opportunities do? Or an existing
business deciding which new market to enter or new product line to add?
Does it make sense to invest the time and effort to develop a business plan for every option? Or
just take an educated guess as to which direction to pursue without a thorough examination of the
alternatives and their implications?
For those caught in this dilemma, an answer can be found in business modeling. Business
Modeling is a process of documenting the key assumptions across a broad set of strategic and
tactical components. The resulting Business Model should be sufficient to compare and contrast
competing opportunities and make a determination as to which alternative is best to carry
forward to the Business Planning stage. With a little practice a number of very comprehensive
Business Models can be developed over the course of several hours instead of the several weeks
or months required to develop a detailed Business Plan.
Formal Business Modeling methods are relatively new. This presentation introduces one
approach that I have developed at the University of Wisconsin-Stevens Point. I have
incorporated it into my introductory entrepreneurship classes with great success. Novice
entrepreneurs are able to quickly grasp the scope of issues to be considered and are capable of,
within a very short period of time, assess a number of business opportunities and determine
which, if any, is worthy of further development.
This report describes the sixteen essential components of a Business Model, introduces the
Business Model Mapping tool, and illustrates the process using a case example. The insights
gleaned from this presentation are relevant to entrepreneurs, business advisors, investors and
non-profit organizations; as well as existing firms considering new lines of business.
22
The Entrepreneurial Imperative
Based on a quick scan of the popular press, entrepreneurship and new business creation seem to
be the most popular solution to reviving our anemic economy. New resources promoting and
supporting entrepreneurs seem to pop up in the headlines every day:




“Startup business help offered” Central Wisconsin Business, September 26, 2011.
“Business programs sprout up in colleges” Green Bay Press Gazette, August 20, 2011.
“Long-awaited Startup America opens for business” Wall Street Journal, September 26,
2011.
“… 2010 startup rate remains highest in 15 years…” KauffmanFoundation.org, March 7,
2011.
Nevertheless, the 2010 Kaufmann Index of Entrepreneurial Activity1 shows that Wisconsin ranks
third from the bottom in new business created in 2010; at a rate of 0.18 percent versus the
national average of 0.34 (0.18 means 18 new businesses per month were created per 10,000
adults). Its average rank over the past 14 years is 32nd. The worst state in 2010 was West Virginia
(0.17); the top 15 states had rates between 0.36 and 0.51.
While many factors contribute to variations in entrepreneurial activity between states—
individual dispositions, opportunity, necessity, resources, cultural differences, population shifts,
etc.—it is clear that the state of Wisconsin lags its peers on this dimension. This paper does not
attempt to explain why but does put forth an idea that may increase the number and quality of
ideas translated into business plans and ultimately lead to more actual startups.
Business Modeling
Business modeling is a relatively new concept, only being formalized in the past few years.
Based on his 2004 doctoral thesis2, Alexander Osterwalder developed the Business Model
Canvas around 20083 and published a best-selling book in 20104. The purpose of a business
model is to efficiently, yet comprehensively, describe “the rationale of how an organization
creates, delivers and captures value.4” It is not intended to capture all the detail and depth
commonly found in a business plan. Nevertheless, it should still be sufficient to communicate a
fairly clear vision of how an idea might be translated into a business. Thus, it is sufficient to
compare, contrast and critique competing approaches (e.g., an on-line retailer vs. a physical retail
storefront).
23
Osterwalder’s Business Model Canvas5 includes nine business model building blocks:
1. Key Activities – the most important activities in executing the value proposition.
2. Key Resources – the resources necessary to create value for the customer.
3. Partner Network – relationships considered essential to accomplishing the value
proposition
4. Value Proposition – the goods and services offered and their distinguishing advantage
5. Customer Segments – the specific target market(s) intended to be served
6. Channels – the proposed channels of distribution
7. Customer Relationship – the type of relationship the firm wants with its customers
8. Cost Structure – characteristics of the costs structure
9. Revenue Streams – the way the company will make money, how it is paid and pricing
Prior to Osterwalder’s concept, business models tended to be classified into general categories
and designated by a simple catchphrase (e.g., bricks and clicks; on-line content provider, lowcost producer, razor and blades, etc.). With his nine building blocks a more detailed and nuanced
version of a business model can be defined. Osterwalder envisions the model as a hands-on tool
to foster understanding, creativity, discussion and analysis.
The Business Model Map
The need for a Canvas-like framework arose while teaching an introductory entrepreneurship
course for students with little prior business knowledge. Students from all disciplines—
communications, health and wellness, interior design, the fine and performing arts, as well as
business—were encouraged to enroll. The traditional “business plan” framework was
inappropriate for this audience; given their limited background—something equally
comprehensive but simpler, higher level and easier to construct was required. It was also
important that the new framework integrated the pre-business planning activities of idea
generation and concept development, as well as incorporated the aspect of the “entrepreneur as
an individual.” After several iterations of an independently conceived model, then incorporating
Osterwalder’s work, the Business Model Map framework evolved.
The 16 Components
The Business Model Map introduced in this paper extends Osterwalder’s work, adding some new
building blocks and dividing others into more distinct parts. The Map identifies sixteen
“components” of a Business Model. Entirely new components include Entrepreneurial Fit,
Role/Position in the Value Chain and Intellectual Property while others like Operating Activities
and Marketing Activities represent a more precise distinction of Osterwalder’s Key Activities.
24
The table below shows how the Business Model Map components correspond to the Business
Model Canvas building blocks.
Business Model Map
(Leschke 2011)
1. Value Proposition
a. Essential Means
b. Essential Need
2. Entrepreneurial Fit
a. Starting Position
b. Personal/Technical/Strategic Fit
c. Exit Alternatives
3. Role/Position in the Value Chain
4. Target Market/Customer
5. Products/Services
6. Channels of Distribution
7. Revenue Streams
8. Costs and Expenses
9. Operating Activities
10. Key Suppliers and Partners
11. Resources and Assets
12. Intellectual Property
13. Marketing Activities
14. Customer Relationships
15. Product Alternatives
16. Industry/Economic Environment
Business Model Canvas
(Osterwalder, et al. 2010)
Value Proposition
Customer Segments
Value Proposition
Channels
Revenue Streams
Cost Structure
Key Activities
Partner Network
Key Resources
Key Activities
Customer Relationship
The additional components call on the entrepreneur to consider a more complete set of issues.
Entrepreneurial Fit demands the entrepreneur to reflect on his personal strengths and limitations,
ambitions and goals, personal values and lifestyle objectives. Since the process of building a
business is both a personal as well as a professional journey, it is critical the entrepreneur himself
be included in the model assessment. Similarly, if the model is for expanding an existing
business, it is important to consider the firm’s history, strategy and competencies.
Describing the role in the Value Chain is important for perspective. By noting where the value
proposition falls within the overall value chain, the modeler can hopefully better define the value
added, product and service characteristics, channels, target market and other components, but
also see where the idea fits into the larger scheme of value creation. Perhaps, this stepping back
for a higher level view may lead to identifying a new model to consider at a different valueadding stage. For example, an entrepreneur initially intent on opening a retail coffee shop might
25
consider the alternatives of being a wholesaler, roaster, franchisee or importer which may, in
fact, be more profitable, lower risk and a better entrepreneurial fit.
Intellectual property is important to consider if there are substantial intangible assets currently in
place or required for the model to be successful. Explicitly noting a wealth or a gap of
intellectual property complements the assessment of Fit. It can also suggest examining
alternative business models such as licensing, consulting or selling property rights.
Adding Product Alternatives and Industry/Economic Environment components to the Map fill
out the analysis by incorporating four major elements of business strategy: product substitutes,
rivals, other threats, and dynamics in the external environment.
Role/Position in the Value Chain
Key Suppliers and
Partnerships
Operating Activities
Marketing Activities
Customer Relationships
Channels
of Distribution
Cost and Expenses
Value
Essential
Means
Proposition
Products and Services
Resources and Assets
Current Position
Essential
Need/Want/
ProDesire
Target Customer
Revenue Streams
Intellectual Property
Product Alternatives
Personal/Entrepreneurial/Technical/Strategic Fit
Industry/Economic
Environment
Exit Alternatives
The graphical representation of the Business Model Map is shown in the figure above. A table
with working definitions and question prompts for each of the sixteen components is included as
an Appendix.
Like the Business Model Canvas, the Map can be enlarged and laid out for a group to mark up or
apply notes. Alternatively, the sixteen components can be presented in a table format. The
26
tabular format is very effective for summarizing the results in an efficient and compact way, as
demonstrated in the following example.
An Illustrative Example: Business Models for a Coffee Shop
The corner coffee shop is a very familiar business model and serves as a good example to
illustrate the Business Model Mapping tool. The process begins by capturing the essential idea –
a coffee shop—then annotating the Map with short bullet points describing key assumptions,
intentions or implications for each component. See the Appendix for explanation and
clarification of each component.
There is no prescribed sequence to business modeling—it is a non-linear, iterative process;
however, working through the components in the general order presented in the table has a
logical flow and most likely speeds the process. In this case, the entrepreneur has identified two
approaches for entering the coffee business: a small café and an outdoor kiosk.
Business Model Map
Components
1. Value Proposition
a. Essential Means
b. Essential Need
Café Model
 A café offering fine coffees
and espresso-based drinks in a
warm welcoming atmosphere
Entrepreneurial Fit
a. Starting Position
b. Personal/Technical
/ Strategic Fit
c. Exit Alternatives
3.
Role/Position in
the Value Chain
4.
Target
Market/Customer




5.
Products/Services

6.
Channels of
Distribution

7.
Revenue Streams
8.
Costs and





2.


Kiosk
 A kiosk offering fast and
convenient hot coffee and
espresso drinks for people on
the go
No prior restaurant experience  No prior restaurant experience
Changing careers
 Changing careers
Enjoys meeting people
 Enjoys meeting people
Enjoy the business then sell in  Enjoy the business then sell in
a few years
a few years
Final production step and
 Final production step and
direct delivery to customer
direct delivery to customer
People seeking a place to relax  Professionals on the go, on
and enjoy a conversation or
coffee break, between
just a cup of coffee
meetings or on an errand
Coffee, tea, espresso,
 Hot coffee and espresso
smoothies, pastries, bulk
drinks, to go snacks, soft
coffee, iced drinks, t-shirts and
drinks and water
coffee-related gifts
Café in upscale business
 Kiosk in high traffic location
district, shopping district or
neighborhood
Sales of products
 Sale of drinks
Premium pricing
 Competitive/affordable pricing
Cash, credit and loyalty cards  Cash and prepaid punch cards
High volume required
 Limited capacity and volume
Coffee and food, milk, staff,
 Coffee and food, milk, outdoor
27
Expenses
utilities, lease, laundry,
insurance, high fixed costs,
high margin
Drink preparation, table
service, cleaning,
maintenance, scheduling,
purchasing, stocking inventory
and merchandise, opening and
closing
Landlord, coffee supplier,
other vendors, health
department, neighboring
businesses
Personal Savings, furniture,
fixtures and equipment,
inventory
Brand, name and trademark,
logo, knowledge of coffee,
location, specialty drinks,
menu, atmosphere, décor,
barista skills
Signage, print media, website,
promotions, events,
advertising, sponsorships,
coupons
Personal, loyal, face to face,
professional, yet friendly,
repeat customers, sense of
affinity to café
Home brewing, nearby cafes,
non-coffee beverages
9.
Operating
Activities

10.
Key Suppliers and
Partners

11.
Resources and
Assets

12.
Intellectual
Property

13.
Marketing
Activities

14.
Customer
Relationships

15.
Product
Alternatives

16.
Industry/Economic  Coffee culture, limited
Environment
disposable income
space rental, wages, low fixed
and variable costs, high
margin
 Drink preparation,
transportation and setup,
teardown and cleaning,
maintenance, purchasing and
stocking kiosk, seasonal prep
and shutdown
 Coffee supplier, kiosk vendor,
equipment maintenance firm,
licensing and permitting
agencies
 Kiosk and brewing equipment
 Location, coffee making,
barista skills, customer service
skills, specialty drinks
 Signage, word of mouth,
coupons, Twitter promotions
 Personal, friendly, face to
face, repeat customers
 Home brewing, office break
rooms, nearby cafes, soft
drinks
 Coffee as a pick-me-up, faster
pace of life
This example illustrates the relatively low level of detail and specificity necessary to effectively
capture the key characteristics of each approach. The differences are highlighted and
implications of each are apparent. In just a short time (constructing this example took 45
minutes), an entrepreneur can comprehensively capture the implications of pursuing a business
opportunity in a particular way and make an more than reasonably informed assessment of its
potential risk and reward.
28
Other Applications
The same process can be applied by established firms. Business Model Maps can be prepared to
evaluate introducing a new product or line, entering a new market or adding another channel.
Mapping could be used to examine the implications of entering a business at different stages of
the value chain (i.e., manufacturer or seller). It can also be used to decompose an existing
business into its component business models and permit management to more clearly see and
exploit synergies and economies between new or existing opportunities.
This notion—that a firm can be conceptualized as multiple overlays of various business
models—is particularly useful to the new entrepreneur looking ahead to developing a business
plan. Having a set of alternative approaches to entering a market, the entrepreneur has the
capability to create a plan in which the enterprise grows over time by incrementally laying on
additional models. This approach makes business planning more flexible (and realistic) in the
sense that the execution plan can be presented in terms of business model segments and
achieving certain milestones, rather than a single long-term vision and a single aggregation of
business models. This contingency approach allows the plan to be implemented as events
transpire and opportunities present themselves without necessarily needing to prepare a new
business plan.
The same benefits apply to other participants in the business development process. Investors and
lenders can better advise and assess risk. Business development teams can better define the scope
and objectives of a particular project.
Business Model Mapping is equally applicable to non-profit situations. In one case, a local, nonprofit organization dedicated to promoting sustainability, small-scale agriculture and healthy
eating had a narrow window of opportunity. A property with an abandoned greenhouse in the
heart of the city was to be sold by the bank. Before soliciting offers from developers, the bank
offered the non-profit the opportunity to buy the property at a below market price. With very
limited time, the organization scrambled to find the funds and purchased the site. In less than two
months, the non-profit closed on the property.
Concurrent with the negotiations to purchase the property, meetings with potential donors were
taking place. On several occasions, donors explicitly asked to see a business plan before they
would consider a gift. Given the rapid unfolding of events there was no time to write a
meaningful business plan.
In this case, the opportunities were endless. There was so much potential. Narrowing down the
possibilities in a formal business plan was impractical at this stage. Clearly, before any further
decisions could be made a major concept development and assessment process was needed. Yet,
progress on the project was stalled until more funds could be acquired.
29
This case highlights the importance of an efficient and effective methodology for generating
ideas and evaluating opportunities. An initial brainstorming session yielded dozens of appealing
uses for the greenhouse property—there was no way to create a meaningful and executable
business plan that captured the long term vision imagined by the project participants. Without a
means to document the requirements and implications of pursuing each idea, it would be nearly
impossible to reach a consensus on implementation priorities. The leadership was overwhelmed.
After a workshop introducing the Business Model Map and Mapping process, the feeling of hope
in tackling this problem were palpable. Small work groups were assigned to map different
opportunities without judging whether they might be in the business plan or not. In this way,
every member had the opportunity to present their idea, share it with others, and feel satisfied
that it received a fair hearing. After all the maps were completed the leadership began the
process of sifting through the alternatives, setting priorities, laying out implementation stages
and determining resource requirements over a realistic planning horizon.
Summary
Business Modeling and its accompanying Business Model Map can be a powerful tool in
developing and evaluating business opportunities before a formal business plan is prepared. The
methodology is broadly applicable—for new ventures or established business, for non-profit and
for-profit organizations, for incremental adjustments to business strategy or major departures into
new markets. Business modeling can rapidly document and evaluate a large number of
opportunities making it vital to firms in fast-moving markets or high-technology environments.
Coupled with the resources and new programs promoting and supporting entrepreneurs and
entrepreneurship, Business Modeling has the potential to speed development and shorten the
time between conception and launch. Business Modeling is not a substitute for business
planning—training and education in business planning is still necessary—but Business Modeling
should also be part of an entrepreneur’s education. For example, Small Business Development
Centers supported by the SBA and other agencies could include Business Modeling in their
course offerings, even making it a pre-requisite to Business Planning.
Anecdotal evidence suggests venture capitalists fund only one-in-ten proposals. Therefore, there
are nine aspiring entrepreneurs and nine potential business starts. It may or may not be that
Wisconsin is less entrepreneurial-minded, but it is likely there is a pool of entrepreneurialminded individuals in the pipeline actively searching for the right opportunity. Business
modeling has the potential to speed this process, connecting entrepreneurs to their right
opportunity—m ore ideas, better ideas—more options, better plans—better plans, more business
starts.
30
References
1. “Kauffman Index of Entrepreneurial Activity 1996-2010,” Robert Fairlie, Ewing Marion
Kauffman Foundation, 2011. (www.kauffman .org)
2. Alexander Osterwalder (2004). The Business Model Ontology - A Proposition in a
Design Science Approach. PhD Thesis, University of Lausanne.
3. “The Business Model Canvas,” nonlinearthinking.typepad.com, July 05, 2008. Accessed
Feb 25, 2010.
4. Business Model Generation: A Handbook for Visionaries, Game Changers, and
Challengers, Eric Osterwalder and Yves Pigneur, Wiley, 2010.
5. “Business Modeling” and “Business Model Canvas” Wikipedia, as of October 27, 2011.
31
Appendix: Business Model Mapping Component Descriptions
Business Model Map
Components
1. Value Proposition
a. Essential Means
b. Essential Need
2.
Entrepreneurial Fit
a. Starting Position
b. Personal/Technical
/ Strategic Fit
c. Exit Alternatives
3.
Role/Position in
the Value Chain
4.
Target
Market/Customer
Component Descriptions








5.
Products/Services
6.
Channels of
Distribution
Revenue Streams
7.







8.
Costs and
Expenses
9.
Operating
Activities

10.
Key Suppliers and
Partners
Resources and
Assets

11.

What is the nature of the value provided for which the customer is
willing to pay?
o What are essential characteristics of the means or method
employed?
o What are the defining needs, wants or desires being met?
What is current situation?
Fit with the entrepreneur’s …
o Ambitions and goals? Attributes and competencies? Managerial
expertise?
Fit with the existing business’ …
o Technical and managerial experience? Strategic objectives and
goals?
What are the exit and harvest options?
What is the value adding activity?
o Extraction? Processing? Fabrication? Transportation? Wholesale?
Retail?
Who is the target customer or market?
o Demographics? Needs? Wants? Desires? Sources of pain?
What is the customer’s buying behavior?
o Order-winning criteria? Order-qualifying criteria?
What products and/or services are offered?
o Differentiating characteristics? Mix? Functions and features?
What research and design infrastructure is required?
What are the channels for distributing the product or service?
o Retail? Wholesale? Distributors? Online Storefronts?
How will the business make money?
o Subscription? Commission? Direct sale, etc.?
How is the product priced?
How is the transaction executed?
What are the major cost and expense components?
o What categories are unique to this model? Require close
management?
What operating activities are critical to this business model?
o Product design? Logistics? Production? Transaction processing?
o Quality? Flexibility? Cost? Speed?
Who are the key suppliers and upstream partners?
o Joint ventures? Contractual relationships? Vendors? Networks?
What resources or assets are critical to implementing the business
model?
o Plant and equipment? Human capital? Infrastructure?
32
12.
Intellectual
Property


13.
Marketing
Activities


14.
Customer
Relationships

15.
Product
Alternatives

16.
Industry/Economic
Environment


What intellectual property is essential to the business model?
o Distinctive competencies? Patents? Trade Secrets?
How much additional research and development is required?
o Critical milestones? Resources required? Timeframe?
How are the products and/or services to be marketed?
o Product Features and Attributes? Pricing, Placement and
Positioning?
Selling methods and strategy?
o Advertising and Promotion? Media? Branding?
What kind of relationship between the customer and the company is
desired?
o Face-face? Online? Professional? Personal? Social Media?
What alternative exist to address the customers’ needs, problems or
desires?
o What are their comparative advantages? Disadvantages?
What are the relevant industry, market, technological, and cultural
trends?
o Growth and Expansion? Contraction? Rules and Regulations?
What broad economic trends or factors are relevant?
o Income Levels and Spending Patterns?
33